More bad news for San Francisco’s city pension fund

Supervisor Sean Elsbernd doesn't have a lot to smile about when it comes to pensions and retiree health accounts. (Credit: The Chronicle)

City Hall officials seem to be experts at getting worked up over an issue and then quickly forgetting about it. Remember the long debates over police-monitored security cameras, public power and congestion pricing, all of which pretty much fizzled?

But just because collective amnesia sometimes descends on City Hall doesn’t mean the issue itself has disappeared.

Witness the city’s pension fund. It was at the center of a heated debate last year, and “the city family” led by Mayor Ed Lee successfully convinced voters to pass a ballot measure last November that made some changes to the pension system. Just about everybody involved admitted the measure was just a first step and would not solve the problem of skyrocketing pension costs.

But apparently pension reform was so 2011. This year, there’s been hardly an utterance of the phrase.

That doesn’t mean pension troubles have gone away, though. A preliminary report of how the city’s pension fund performed in the fiscal year 2011-12, which ended June 30, shows it earned a meager 1.6 percent — far below the assumed rate of return of 7.5 percent.

The shortfall was due to a 14 percent loss in the fund’s international private equity investments, which represent about a quarter of the total pension fund.

“People read about Greece. People read about Spain. People read about Ireland, and they think it’s the other side of the world and doesn’t affect us,” said Supervisor Sean Elsbernd. “It absolutely affects us.”

Robert Shaw, chief investment officer for the San Francisco Employees’ Retirement System, said it’s unwise to look at the pension fund’s returns over just one year and draw any big conclusions. Last year, in fact, the fund gained 22 percent, well above projections.

And the San Francisco fund certainly isn’t the only one to show low rates of return over the past year. The California Public Employees Retirement System earned just 1 percent, and the California State Teachers’ Retirement System earned just 1.8 percent.

Shaw said he’s “not pleased” with the city fund’s 1.6 percent return, but that it’s not cause for alarm.

“When you start looking at longer term numbers, we’re petty much where we need to be,” he said. “It would be nice to be better, but I’m not unhappy with it.”

Elsbernd, the board’s fiscal hawk and the only politician who seems to keep an eye on the pension fund, said the amount the city will need to contribute to fill the pension hole won’t be known for months but said it could be around $15 million. He also noted that the Board of Supervisors and mayor didn’t factor that amount into its recently approved two-year budget and will have to backfill it somehow.

But Elsbernd said he is much more concerned about the city’s more than $4 billion in unfunded retiree health care costs — for which the city’s saved almost nothing. Elsbernd has called on the board to require the controller’s office to report annually on that escalating dollar figure and ways to pay it.

Elsbernd is termed out in January, leaving nobody currently at City Hall who regularly brings up these dull, yet important issues.

Adachi vowed he won’t be the one to wade into the issue all over again.

“Maybe in another lifetime,” he said. “I think I’ve taken enough political abuse for pension reform.”